Bankers have warned that the European Central Bank’s plan to support European economies through direct purchases of their government bonds could leave the intended beneficiaries dangerously vulnerable to shifts in market sentiment.

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The bond purchase scheme of ECB president Mario Draghi (pictured right) is intended to drive funding costs down for Spain and Italy by lowering yields on short-term bonds so much that private investors are forced to buy longer-dated deals. This, in turn, should drive down yields for longer-term debt as well.

But Brian Barry, a fixed-income analyst at Investec, said: “It all depends on the scale of purchases the ECB is willing to make.”

Should the ECB purchase bonds in sufficient quantities, the desired effect could be achieved. But if limited buying stabilises short-term debt to the extent that private investors are attracted to it, without driving yields so low that they migrate further along the maturity curve, the countries concerned could find themselves entirely reliant on short-term financing.

Marcus Ashworth, head of fixed income at Banco Espirito Santo, said: “The ECB buys and suddenly everyone’s totally reliant on the short end. Bailout policy will sort out the one-year to 18-month part of the curve. That saves you but the reality is that you have to roll that over and you have no security.”

Barry added: “There is undoubtedly a risk that the ECB will increase concentration at the short end [of the yield curve]. As the average life of your debt declines, you see a larger annual refinancing requirement. You’re at the whim of the market – everything depends on sentiment at a given time.”

This dynamic would exacerbate a problem that already exists. According to the Spanish Treasury, 38.4% of its existing debt is due to mature between now and 2015, while Bloomberg data reveals that 22.5% of Italian debt will come up for refinancing over the same period. For debt that will mature between now and January 2017, those figures rise to 56.6% and 38.9% respectively.

Ashworth contrasted this with the UK, where only 12.7% of gilts mature before 2015, according to Bloomberg, rising to 27.7% by 2017. Almost a quarter, 23.10%, of its debt matures in 2035 or beyond. For Spain that figure is 5.5% and for Italy it is 6.9%.

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Ashworth said: “The UK has been saved by its very long debt maturity profile.” Large UK life insurance companies and pension funds have a requirement for long-dated debt.

Yields on Spanish and Italian short-term debt have declined since Draghi announced the purchasing plan on August 2. Two-year Spanish debt on Friday had dipped to 3.73% from 4.83%, according to Bloomberg, with Italian yields falling to 2.89% from 3.74%.

Longer-dated deals continue to remain at levels widely regarded as unsustainable. On Friday afternoon, the Spanish 10-year benchmark was quoted by Bloomberg at 6.7%, perilously close to the 7% figure associated with previous eurozone sovereign bailouts. The Italian equivalent was at 5.78%, a sufficiently costly level to wipe out the country’s primary fiscal surplus – tax receipts versus outgoings – once debt repayments are taken into consideration.